Question 1 - Determine effects of stock dividend and stock split
Riff CD Company has had 4 years of retained earnings. Due to this success, the market price of its 400,000 shares of $3 par value common stock has increased from $12 per share to $51. During this period, paid-in capital remained the same at $2,400,000. Retained earnings in¬creased from $1,800,000 to $12,000,000. CEO Josh Borke is considering either (1) a 15% stock dividend or (2) a 2-for-l stock split. He asks you to show the before-and-after effects of each option on (a) retained earnings and (b) total stockholders' equity.
Question 2 - Prepare a retained earnings statement
Alpha Centuri Corporation has retained earnings of $3,100,000 on January 1, 2010. During the year, Alpha Centuri earned $1,200,000 of net income. It declared and paid a $150,000 cash dividend. In 2010, Alpha Centuri recorded an adjustment of $110,000 due to the overstatement (from mathematical error) of 2009 depreciation expense. Prepare a retained earnings statement for 2010.
Question 3 - Compute return on stock-holders' equity and EPS and discuss changes in each
On January 1, 2010, Tuscany Corporation purchased 1,000 shares of treasury stock. Other information regarding Tuscany Corporation is provided below.
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2009
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2010
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Net income
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$200,000
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$210,000
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Dividends on preferred stock
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$30,000
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$30,000
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Dividends on common stock
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$20,000
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$25,000
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Weighted average number of common shares outstanding
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10,000
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9,000
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Common stockholders' equity beginning of year
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$600,000
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$750,000
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Common stockholders' equity end of year
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$750,000
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$830,000
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Compute (a) return on common stockholders' equity for each year and (b) earnings per share for each year, and (c) discuss the changes in each.
Question 4 - Journalize cash dividends; indicate statement presentation
On January 1, Molini Corporation had 95,000 shares of no-par common stock issued and outstanding. The stock has a stated value of $5 per share. During the year, the following occurred.
Apr. 1 Issued 25,000 additional shares of common stock for $17 per share.
June 15 Declared a cash dividend of $1 per share to stockholders of record on June 30.
July 10 Paid the $1 cash dividend.
Dec. 1 Issued 2,000 additional shares of common stock for $19 per share.
Dec. 15 Declared a cash dividend on outstanding shares of $1.20 per share to stockholders of record on December 31.
Instructions
(a) Prepare the entries, if any, on each of the three dividend dates.
(b) How are dividends and dividends payable reported in the financial statements prepared at December 31?
Question 5 - Allocate cash dividends to preferred and common stock
Perez Corporation was organized on January 1, 2009. During its first year, the corporation issued 2,000 shares of $50 par value preferred stock and 100,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2009, $6,000,2010, $12,000, and 2011, $28,000.
Instructions -
(a) Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 7% and not cumulative.
(b) Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 8% and cumulative.
(c) Journalize the declaration of the cash dividend at December 31, 2011, under part (b).
Question 6 - Journalize stock dividends
E14-3 On January 1, 2010, Deweese Corporation had $1,000,000 of common stock outstanding that was issued at par. It also had retained earnings of $750,000. The company issued 40,000 shares of common stock at par on July 1 and earned net income of $400,000 for the year.